Entel doubling down on Peru

Since being acquired by Entel Chile in 2013, the unit formerly known as Nextel Perú has rapidly positioned itself as a major player in the country, launching 4G services the following year. By 2017, Entel Perú had a 16% share of the local market, behind market leader Movistar (Telefónica) and Claro (América Móvil), with 38% and 32%, respectively.

In April, Entel announced investments of US$480mn for Peru by 2020, including US$160mn this year, of which US$130mn will go to 4G infrastructure. Entel is starting to eye the residential connectivity market and considering TV.

To find out how Entel Peru views the competitive landscape and the market's future growth potential, BNamericas spoke to Nino Boggio​, the company's manager for legal, regulatory and corporate affairs.

BNamericas: This year, regulator Osiptel introduced a single interconnection rate for mobile operators, eliminating the differentiated scheme where Bitel and Entel paid less than Movistar and Claro. How does that move affect Entel and the competitive environment?

Boggio: The regulator has issued many measures that favor competition and the entrance of new players, one of those being the reduction in mobile interconnection rates by more than 50% compared to the system that was in place until mid-February.

The rate will be automatically revised in January every year for the next three years. This is new and will improve efficiency in the use of the networks by removing the on-net, off-net distortion and avoid an accumulated differentiation between the cost of service and charges.

BNamericas: But Entel will have to pay the same rate as the established players. Will that affect your competitiveness?

Boggio: Charges are now aligned with the cost of service. Updating interconnection charges is a good thing. We ourselves proposed it like the scheme in Colombia and Chile. Claro and Movistar have now started coming out with unlimited plans so the traffic on their networks is starting to balance.

BNamericas: Bitel has been in Peru for a similar amount of time as Entel and the two are closest in terms of market share. Are they your main rival?

Boggio: We increased our market share to 16.8% in 2017 from 13.6% in 2016 and most of our clients are postpaid. But we started competing more aggressively in the prepaid segment in 2017, which is still important in Peru with unlimited plans.

For the moment our focus is on the customer, our strategy, boosting network capacity and penetrating the residential segment.

BNamericas: Entel Chile is betting on the residential segment and is combining fiber with Massive MIMO for backhaul. Is there a similar strategy for Peru?

Boggio: There is a huge opportunity in Peru's residential market. Last year we started offering residential services with fixed and wireless solutions. We use the 3.5GHz band, which also helps us prepare for 5G. Massive MIMO is still at the experimental stage but we have the spectrum to do it.

BNamericas: How well positioned is Entel in terms of spectrum?

Boggio: We have 100MHz in the 3.5GHz band compared to 50MHz for our competitors. We use it for fixed wireless services, which Chile has done in the 2.5GHz band. We also have spectrum in 2.5GHz, 700MHz, 800MHz and 1700MHz.

BNamericas: Is that sufficient?

Boggio: When you start talking about unlimited data plans you need capacity and spectrum is essential to be competitive.

BNamericas: Entel announced it will invest US$1.96bn by 2020 of which US$480mn will go to Peru. Where will those funds be invested?

Boggio: We will continue investing in the residential segment particularly in fiber to cover the outlying and rural areas. We will also invest in the rollout of the 700MHz band, which we won in 2016 to boost capacity.

BNamericas: Are there plants to move into the pay-TV segment?

Boggio: We are looking at options but we are not there yet.

BNamericas: How did Entel Peru perform financially in the first quarter?

Boggio: I can't comment yet as the results are not public but I assure you we had an excellent quarter.

BNamericas: In Peru there is the national backbone network that is aimed at connecting all of Peru. Has that project met your expectations?

Boggio: That is a moot point and one which the government is going to have to make a decision about soon. It is a state asset but not even 10% of capacity is being used. That is because it has used a business model that has priced itself out of the market as capacity is too expensive.

This goes back to the contract that was negotiated with TV Azteca which runs the network. [With] fixed rates, you can't get a discount for buying more volume. So you can get better rates on other private transport networks like Bitel, Telefónica, Claro, Internexa. The original idea when the contract was signed with Tv Azteca was to narrow the digital divide. Now market rumors have been circulating that Azteca is planning to pull out of Peru.